I am under contract for a duplex where I plan on house hacking. The agreed selling price is $139k and he is paying $4800 of my closing cost. To make a long story short, I have paid $435 for inspections, $635 for an appraisal and $500 of earnest money. The appraisal for property came in today and it came in for $135k. The reason for this is because one unit is in really bad shape. It needs a complete remodel (luckily I run my own contracting business). My contract with the seller states that he is going to replace the refrigerator, stove and paint the walls in that unit. Originally, he wanted to include replacing the carpet in the unit but not pay as much closing cost, but I offered back, for him not to touch the floors and pay more closing cost. The reason for this is because I want to upgrade to laminate (more durable).

Well now, because the appraisal came in low, my realtor is trying to convince me to start replacing the floors with laminate (before the closing date). I have rejected and told her I already have a lot of money on the line (with the inspection and appraisal money) and I am definitely not installing new floors on a unit that isn't mine yet. Her reasoning is because the bank is going to require new floors to be put in before they loan out the money because the current ones are so bad. (This is an FHA loan). She is afraid that with the bad news of having to replace floors, and having to come off the selling price of 4 thousand dollars that the seller is going to walk. I am confused why the bank wouldn't just allow the house to be bought as is if the seller lowers the selling price to the $135k.

To sum up my question, why does the bank have a say in the condition of the property if it is being bought for what it appraises for?

Also, with this being my first deal, I am wondering if my agent is trying to pull a fast one on me because I am young and inexperienced with buying. I want to believe she has good intentions because she is a family friend, but I am not ignorant to the fact that at the end of the day, she just wants the deal to go through for her check.

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